Two Good Pieces on Global Finance from FPIF

Two nice relatively new pieces from the good folks at Foreign Policy in Focus. Hat-tip to LF for alerting me to these. (I like that FPIF lists the editor in charge of an article as well as the author—great idea.)

Overhauling Global Finance

Alex Wilks | May 28, 2009 | Editor: Emily Schwartz Greco

The global financial crisis has discredited the financial institutions that played a part in causing it. Discussions of radical alternatives are beginning to flourish, with the world’s governments rushing to consult experts who previously found themselves out in the cold.

If only. In fact many of the same financial experts as a decade ago populate finance ministries, review panels, and talk shows. The commission of experts convened by the president of the United Nations General Assembly represents one rare exception.

This commission includes 18 researchers, politicians, former officials, and activists from all the world’s regions. Their mandate is to recommend “needed institutional reforms required to ensure sustained global economic progress and stability which will be of benefit to all countries, developed and less developed.” The body is popularly known as the “Stiglitz Commission” because it’s led by Nobel laureate and former World Bank chief economist Joseph Stiglitz. But it’s most notable for the participation of high-level experts from developing countries.

Read the rest of the article.

Plus this one on the IMF, by Aldo Caliari, who has written for D&S:

The IMF is Back? Think Again

Aldo Caliari | June 1, 2009 | Editor: Emily Schwartz Greco

Last year, as the financial crisis reached global and historic proportions, many commentators identified one institution as the debacle’s great winner: the International Monetary Fund. Just two years ago, the IMF seemed to be on an inexorable downward path: its credibility and effectiveness in question, its portfolio of borrowers severely reduced, its legitimacy and governance structure under challenge, and its own finances in disarray. In fact, the Fund had started “downsizing” its staff as the only way to avoid running one of the deficits that it so strongly advises client countries to steer away from.

Against this backdrop, the world’s credit drought offered the international financial institution a lifeline. Observers predicted it would propel countries that had closed their programs with the IMF to have to reapply. Big IMF loans were back. The G20 summit in London in early April, with its dizzying figures in new funding for the IMF (The Wall Street Journal and other major outlets reported a $750 billion pledge) only made the feeling a distinct belief.

Since October of last year, the number of IMF non-concessional loans has more than tripled, while the total volume of outstanding loans more than doubled — from nearly $7.5 billion to about $16 billion. This is far from the almost $50 billion in loans that were outstanding in 2003, but does reflect a U-turn.

Still, looking beneath the surface reveals a more nuanced picture. Accounts that herald the IMF’s “revival” are premature and superficial. Recent events illustrate nothing more than the fact that the world’s largest economies, who happen to be the Fund’s largest shareholders, view it as an instrument to manage emergency crisis financing. That was never, however, in question. It was the borrowers who saw the need for substantial reform in the IMF before this emergency financing function could be played effectively and, in fact, the infusion of large amounts of funding, by freeing the IMF’s hands and relieving its fears of survival that will act against such reforms. On the other hand, there’s little that suggests a sense of renewed faith on the IMF by its main shareholders, let alone by the borrowers.

Read the rest of the article.

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